Perhaps appropriately, stocks celebrated a 120th anniversary of the Dow Jones Industrial Average, the first U.S. index, with a strong performance. Overall, this week has been a better week for U.S. stocks than the previous one, too: the market rallied strongly yesterday, following up on the strength on Tuesday. Commodity stocks came along for the ride, as the price of Brent crude increased yesterday to more than $50 for the first time this year. Oil has now increased some 77 percent from its low in February.
While stocks were relatively flat today, the market now seems more comfortable with the notion that the Federal Open Market Committee (FOMC) could raise interest rates this year, and even at its next regularly scheduled meeting in June. The odds, however, still suggest that policymakers will again err on the side of caution and hold rates steady at least until July, and maybe September. Read more about Happy Birthday, Dow Industrials! 05-26-16
After the release yesterday of minutes from the April Federal Open Market Committee (FOMC) meeting, U.S. stocks slipped again on Wednesday and Thursday. The S&P 500 has again slipped into the red for the year. Commodity stocks, which have enjoyed a strong rebound so far this year, were hit hard. Treasuries fell and yields climbed. The minutes suggested that the market may have over-estimated the Fed’s dovishness. Read more about The Fed Blinked, Markets Reacted 05-19-16
Despite the recent interruption, the market seems to have picked up some optimism, with the rebound that started last Friday.
That was a nice change after three weeks of selling. And while some weak retail earnings hurt U.S. stocks on Wednesday and today, oil, commodities and metals rebounded, with crude jumping on an unexpected 3.4 million barrel decline in the U.S. commercial crude oil inventory.
A soft U.S. Bureau of Labor Statistics jobs report last week launched the stock rebound.
Today’s International Energy Agency (IEA) report, which stated that that the oversupply of oil worldwide is shrinking, despite the expected Iran output entering the market, has added to reasons for the price of oil to continue the rebound. Read more about Corporate News Aplenty 05-12-16
The markets are struggling to keep their morning and early afternoon gains, setting the S&P 500 on course for a third-consecutive day of losses.
The losses in risky assets, on the other hand, coincide with gains in fixed income, and seem to flow from the latest reports of pointing to weak economic growth worldwide.
In the U.S., a labor market report from ADP was disappointing. According to ADP, corporations and companies only hired 156,000 new workers in April, as compared with the expected 193,000. This is the weakest ADP job gain estimate since February 2014, but it’s consistent with a very weak GDP growth report for the first quarter of the year, when the U.S. economy only grew at a 0.5 percent annualized pace.
Read more about ADP Surprises the Market 05-05-16
The U.S. Commerce Department today reported a mere 0.5 percent seasonally adjusted annualized rate of economic growth in the first quarter, the worst showing in the last two years. True enough, the first quarters of both 2014 and 2015 were weak too.
But economic weakness of late has likely factored into the Federal Open Market Committee (FOMC) announcement yesterday. The Fed, at its regularly scheduled policy meeting, decided that it would hold interest rates at their current level. “Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed,” the FOMC statement said. Read more about Surprising No One, the Fed Doesn’t Make a Move 04-28-16